This research was conducted on a topical theme: the excise duty on cigarettes and it futher increase. Although the Ministry of Health continues to actively insist on more rapid and greater increase in the tax burden on cigarettes, the study confirms that the overall tax burden is already high compared to the prices of cigarettes at the purchasing power of consumers in other countries. High prices and low income levels contribute to the illicit market. This paper examines the situation in Latvian, carried out a comparative analysis of both the Baltic states and the EU countries. The study assessed the excise tax burden and consumption correlations and their impact on cigarette prices and tax revenues. The study analyzed whether and what might have been a further increase in excise duty and after 2018. The research shows that the tax rate increase is more rapid than the excise tax revenue growth, thereby the increase of the tax burden more would upset the balance and revenue does not grow as expected. In particular, the authors assessed that the planned tax rate increase could achieved the maximum revenue in the 2018 (about 166 million EUR) as evidenced by the Laffer curve. Therefore, the government should focus on how to ensure the increased budgetary needs and how to cover foregone revenue in the future as raising the tax will no longer be the most effective tool to increase revenue. Analysis of data on legal rapid drop in consumption in recent years and, consequently, a reduction in tax revenue shows that the excise tax increase was not economically justified. By July 1, 2018 a tax on cigarettes will be increased to 60 euros per 1000 cigarettes that is 25% of the maximum retail price and a minimum amount of tax will reach 100 euros per 1000 cigarettes. The study provides suggestions on how to improve the tax administration in order to support the projected tax revenue. As Latvia and the other Baltic states are in direct state border with Russia and Belarus, which is a major source of smuggled cigarettes low prices, it would be desirable to be more effective and 6 more stringent penalty system, enhanced controls and border protection. Latvia customs authorities should strengthen practical cooperation with Russia and Belarus to the customs authorities, in accordance with international agreements concluded on cooperation in the field of customs.